In South Florida’s robust multifamily market, apartment deals have fetched high prices. But for a newly built rental building in downtown West Palm Beach, it turned out that hospitality was its calling.
The building traded for $83.9 million, after the 217-micro-unit property was recast as a hotel.
Electra America Hospitality Group and Korman Communities, through an affiliate, bought the eight-story building at 695 South Olive Avenue from Transwestern Development Company, according to a deed.
The building was completed last year on 1 acre. The deal breaks down to $386,751 per key.
Originally called the Current Apartments, the property is now an AKA hotel.
Gio Fausone of Gulfstream Real Estate Advisors represented the seller and buyers.
Repurposing the apartments into a hotel may seem counterintuitive because the South Florida multifamily market has prospered from high demand, allowing rents to skyrocket and prompting investment appetite. But when it was marketed as apartments, offers came in at the $60 million range, which is less than what the seller had expected, according to Fausone.
At the same time, the hospitality market has in some areas outperformed pre-pandemic levels, and the property has small units, averaging about 400 square feet, he said.
“So I thought about it, and thought those are large hotel rooms, so the buyers ended up being hotel users,” Fausone said. “And they love it.”
Palm Beach County’s hotel occupancy rate hit 77.5 percent, with an average daily rate of $324 per key in the week of April 2, up from 75.4 percent and $218 in the same period of 2019, according to STR, a global hospitality data and analytics company.
Houston-based Transwestern, led by Chairman Robert Duncan and CEO Larry Heard, developed the building with the help of a $30 million construction loan secured in 2020 from Bank OZK, shortly after Transwestern paid $7.3 million for the site. Fausone brokered the land purchase, as well.
Electra America Hospitality, led by principal and Managing Partner Russ Urban, is a joint venture between Lake Park, Florida-based Electra America and AKA hotel company, according to its website. Electra America and AKA have a combined $6.9 billion of assets under management.
Plymouth Meeting, Pennsylvania-based Korman Communities, led by Larry and Brad Korman, started out in the furnished apartments industry and expanded into hotels, creating the AKA extended stay hotel brand, according to Korman’s website. Korman’s portfolio spans Florida, the mid-Atlantic region, Beverly Hills and London and is valued at more than $2.2 billion.
Miami’s Brickell also has an AKA Hotel at 1395 Brickell Avenue. The West Palm hotel will be open for guests in September, according to AKA’s website.
Downtown West Palm has attracted investors for existing real estate and developers planning new projects.
A joint venture between Brand Atlantic, a newly formed company led by Andrew Dance and Adam Demark, and Wheelock Street Capital plan to build a new 12-story office building at 300 Banyan Boulevard, and renovate an adjacent historic office-retail property at 111 Olive Avenue.
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Also, Joe Furst’s Place Projects and Ned Grace’s NDT Development have embarked on the 40-acre Nora District project, which will include adaptive reuse of a row of warehouses into retail and dining, as well as ground-up construction of multifamily and office towers, and mid-rise buildings.